Reevely: Ontario's government can't keep up a permanent war with its auditor

The numbers the Ontario Liberals are using in their financial projections ahead of the June election are “not reasonable,” auditor general Bonnie Lysyk reported Wednesday.

They insist that their multibillion-dollar borrowing to temporarily cut consumer power bills comes without costs to the provincial treasury and that surpluses in pension funds they can’t touch belong on the books, she said in her “Review of the 2018 Pre-Election Report on Ontario’s Finances” — and that leads to dishonest books.

These complaints of Lysyk’s aren’t new in themselves, but they’re not going away. They’re permanent deficiencies in how we keep track of how much money Ontario has and they’re getting worse. This year’s $6.7-billion deficit is actually an $11.7-billion deficit, Lysyk reports, and we’re bound for deficits of $12.5 billion and $12.7 billion in the years to come.

“When expenses are understated, the perception is created that government has more money available than it actually does,” Lysyk says. “Government decision-makers might therefore budget more money to be spent on initiatives and programs, when that money is actually needed to pay for expenses the government has failed to record properly. Therefore, more money will need to be borrowed to pay for the unrecorded expenses even when government reports an annual surplus or a balanced budget.”

Never again, the Liberals declared. We’re going to pass a law, the Fiscal Transparency and Accountability Act, and any future government that messes around the way the Tories did will have an auditor-general’s report to answer to. And hello, here it is.

First the good part: The unexpected can always happen but Lysyk finds the government’s economic forecast reasonable, its revenue expectations appropriate and its list of expected spending generally proper. Big-ticket items like child care and pharmacare come with plausible costings.

But now about the Fair Hydro Plan and the pensions.

Temporarily cutting Ontarians’ electricity bills by 25 per cent means borrowing a bunch of money and paying it off over many years. This year’s share is $2.4 billion, Lysyk says. The Liberals have found a way to keep that debt off the government’s books by making Ontario Power Generation do the borrowing, but in the end we’re all still on the hook.

The pension business is arcane — it involves separate funds for Ontario’s teachers and the Ontario Public Servants Employees Union, and the details are different for each of them — but the Liberals are counting them partly as government property even though the government can’t touch the money that’s in them.

With hydro, there’s money we owe that the government says we don’t have to count. With the pensions, there’s money that’s not really ours but the government says it is.

“At worst, this could help enable a ‘structural deficit,’ where program expenditures are exceeding revenues on an ongoing basis, requiring governments to continuously borrow in order to deliver basic programs,” Lysyk’s report says.

In both cases, the Liberals have credentialed accountants on their side saying they can, in fact, do what they’re doing.

“The government’s opinions on these two matters are well supported by internal and external experts, and have always informed the government’s ongoing reporting on its fiscal status,” Finance Minister Charles Sousa and Treasury Board President Eleanor McMahon said in a joint statement. “Given these disagreements on accounting questions, there is also a difference of opinion on deficit numbers between the auditor general and the government.”

Accountants, amirite? What are you gonna do?

Listening to your auditor general is what you ought to do. Being the final authority on the government’s books is her first function.

The Liberals made this mess but it’s a problem for all of the parties now. The opposition parties are happy to rail against the Liberals for their dishonesty, yet the New Democrats have adopted the Liberals’ handling of the numbers as their own: nowhere in their detailed platform book do they raise taxes or cut spending to get back on the track Lysyk lays out.

The Tories are dispensing with a costed platform, so who knows what they’ll do.

At some point, Ontario has to get out of this, though, and the list of options is pretty short. The government, whatever party controls it, can bite the $5-billion bullet with tax hikes or spending cuts. It can get rid of Lysyk (she has five years left in her 10-year term and as an officer of the legislature, she’s not easily fired) and replace her with someone who will do the books the politician-friendly way.

It’s got to be one of these. Ontario can’t have every budget from now until forever come with a big asterisk on the cover.

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